If you don't pay your homeowners insurance, your mortgage company will. But it's going to leave you singing the blues. Stacy Johnson explains how this works…
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1. Loyalty is Overrated
Many insurers have been raising rates to make up for losses they suffered during the financial crisis. At the same time, insurers are competing hard for new customers, which means some of them are cutting better deals for new policy holders than for existing ones.
When your annual renewal statement arrives in the mail, check InsWeb.com and NetQuote.com to see if you can snag a better deal elsewhere. Consider moving your auto policy too; bundling home and auto coverage with the same insurer can cut your total premiums by 5% to 15%.
2. You May Have Too Much Coverage
It's common for policies to contain inflation-protection provisions that automatically increase your coverage amount. "In most years, that's a good thing," according to Scott Richardson, director of the South Carolina Department of Insurance. Now that construction costs have fallen? Not so much.
For now, pass on inflation protection and adjust your coverage amount to a more realistic figure. Lowering replacement value from, say, $300,000 to $250,000 might shave 10% off your premium.
3. A Bad Rep Can Cost You
Just as lenders check your credit history before figuring out what rate to charge you, insurers tap into national databases such as the Comprehensive Loss Underwriting Exchange (CLUE) to see what claims you've filed in the past. Those records can be full of errors, warns Doug Heller, executive director of Consumer Watchdog, an insurance advocacy group.
Check your insurance report for mistakes at choicetrust.com; it's free if you've been denied coverage ($19.50 otherwise).
4. Small Claims Can Cost You
Go with the highest deductible you can afford and bank the savings to cover the cost of minor repairs. Filing a claim for every broken window or leaky pipe can drive up your premiums by 10% to 15%, says Don Griffin, a vice president at Property Casualty Insurers Association of America. (Some experts say that even inquiring about making a claim can raise a red flag.)
Increasing your deductible from, say, $500 to $1,000 can lower your annual premium by as much as 25%, according to the Insurance Information Institute.
5. A Home's History Matters
In the market for a new house? It may seem unfair, but claims associated with the property before you buy it can result in your paying more than you would otherwise. "Certain locations (such as those vulnerable to flooding) may be more prone to claims.
To get info on past claims, ask for a copy of the seller's CLUE disclosure report (see No. 3). Yes, you're stuck with the history of the house you buy, but you can use what you find to negotiate a lower price with the seller.
Have any other questions about homeowners insurance? Use the comment link below to ask us and we'll get back to you with answers.
Flood Insurance Getting Harder to Find
From the Gulf oil spill and the floods in Arkansas and Oklahoma to the procession of hurricanes forecast for this year, the stage is set for major property damage in 2010.
Yet people looking to bolster their homeowners-insurance protection are likely to find that premiums are pricier, and extra coverage is harder to get, than ever before.
Government and private forecasters are predicting an active hurricane season, which runs now through Nov. 30. But insurers are selling fewer policies, raising premiums and reducing or dropping wind coverage as far north as Massachusetts.
Only one in five homes in a high-risk flood zone carries flood insurance—and new coverage is getting increasingly difficult to find. Congress hasn't yet extended the National Flood Insurance Program, which is administered by the Federal Emergency Management Agency and provides the vast majority of flood policies in the U.S., after it expired on June 1. As a result, no new NFIP policies and renewals are being issued.
The House has passed an extension bill, and federal officials say they believe Congress will reauthorize the program eventually. New policies would likely be retroactive—but there is a 30-day waiting period after a policy is approved before it takes effect. So insurance experts urge homeowners who need flood insurance to apply now despite the hiatus.
Natural Disaster Planning for Homeowners
Unless you've been living in a closet since the first of January and missed all the news around the world with all the earthquakes, then you are well aware of the fact that the threat of natural disasters such as earthquakes, hurricanes, floods, tornadoes, hail, mudslides and wildfires is a reality of life for many Americans. These anomalies cannot usually be avoided, but their effects on your property and life can be minimized.
If you become a victim of one of these disasters, what should you do?
The three steps you should take are: plan, prevent and insure.
Plan
Escape routes should always be planned out in advance, whether concerning fire, flood, hurricane or other disaster alerts. In addition, every member of your household needs to know who/where to call for help, and to let others know they are safe or in trouble.
At least twice a year the entire household should review escape routes and plans together, making sure emergency telephone numbers still operate. Post escape routes and phone number information in a prominent place for quick referral as necessary.
During high risk seasons, consider putting irreplaceable (or hard to replace), important items like passports, birth certificates, military papers, marriage/divorce papers and jewelry, along with a video or photos of your material goods (and a serial number list/receipts/appraisals) in a safe deposit box. Overnight bags should also be packed for each family member and for pets, and identification and money/credit cards should be kept with you at all times.
Don't forget your precious heirlooms and photos if you have to vacate your home!
Prevent
Not much can be done to prevent earthquakes, hurricanes or tornadoes. However, measures can be taken to prevent wildfires and floods (or mudslides). The American Red Cross and Federal Emergency Management Agency Web sites (www.redcross.org, www.fema.gov) are invaluable sources of information.
Insure
No matter how prepared you are, sometimes things go wrong. Having the right insurance during these times is critical.
Your renter's or homeowners policy covers many things, but may still be inadequate. For example, if a plumbing valve bursts inside your home, your homeowners policy will probably cover the damage. However, if the sewage or water main pipes outside your home break, you may only be covered if you have flood insurance.
If a flash flood occurs, your homeowners insurance will likely not cover your losses; you will need flood insurance. Even with flood insurance, your possessions in the basement will probably not be covered, so you will need to move things upstairs. In addition, flood insurance policies do not take effect for 30 days; keep this in mind when you purchase a policy of this type.
Earthquake insurance is essential in areas of the country that are more prone to this type of disaster. But what many people do not know is that various types of earth movement, including landslides, are covered under this kind of policy. So if a boulder rolls down a hill and into your house, your homeowners insurance may not be the only coverage you need.
Regardless of your situation, it is important to find the best homeowners insurance policy for you and your property.
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